Adventures in Parenting

In previous generations, kids were expected to work for their own spending money, and even to contribute to the family’s needs. Later as parents, they, understandably, wish their children to have an easier life than they had by making it possible for their children not to have to labor as they did.

Unfortunately, this has led people nowadays to believe they are entitled to having the good life of the latest fashions and toys. They haven’t learned to budget, to delay gratification by saving up, and to plan for the future.

How can we teach our kids to learn the value of money while allowing them a good life, and complying with child labor laws?

Parents and financial experts have various opinions about the concept of an allowance.  Neither my husband nor I were given allowances when we were growing up. We opted not to give allowances to our children as well. So I won’t be talking about that too much.

The first and probably the most obvious way to teach your children about saving and budget is to open a savings account for them. Then what? How do you manage that account? What goes in and under what circumstances can money come out?

Here are some suggestions:

1. Even before my children were old enough to understand money, we put their gift money from relatives into their bank account. It became a given that money they receive – birthday, Christmas, special occasions – all go into the bank account. There is never any question or discussion about what to do with the gift money.  It goes directly into savings.

2. When the children want a special item that is beyond what we would pay for,  they can take some money out of the savings account to augment their purchase. For example, I would be willing to pay $30 for an ordinary bicycle. If my son wanted a special bicycle with extra features, he has the option of dipping into the savings account to pay the difference.

3. The children cannot use the money for items that I do not approve of. For example, if I don’t approve of a game they want, they cannot say, “I’ll buy it with my own money.”  What money? I teach my children that they don’t have any money, yet. Those gifts in the account will be available to them when they turn 18 to be used for college.

4. What about if they want to save up for something they really want? If my daughter wanted a special dress (and I think she already has enough special dresses), she can take out half the amount each month so it takes two months to get the item. Usually after waiting two months, she doesn’t want it anymore. This helps them not to buy on impulse. The more frivolous the purchase, the longer they have to stretch out the waiting.

5. The purpose of the savings account is for their future. “This money is for college. It’s not for you to spend it on toys.” Whenever the bank statement comes in, we look to see how much interest they’ve earned simply by not touching it.  This teaches them something about long-range planning towards something of greater value. They don’t understand the value of college yet, so it is up to us as adults to build the value of education along financial responsibility for it while they are young.

Next post on teaching children about money: Teaching Children to Set Priorities for Spending.